In late October of 2006, President Bush signed a law that will benefit both donors and most nonprofit organizations classified as 501(c)(3).

For 2006 and 2007 only, a person who is at least 70½ can donate up to $100,000 annually from their IRA accounts to a public charity. These donations are tax-free to the donor and count toward the mandatory withdrawal amount from the IRA account.

There is an urgency by all non-profits to let everyone know about this wonderful opportunity because of the time constraint. This policy is currently in effect only until the end of 2007.

A small gift from an IRA can go a long way with this new law. It allows the charity an opportunity to use the money as an outright gift, but also affords the donor the chance to escape income tax on the IRA withdrawal. The only stipulations with this new law are: 1) the donation must be made from an IRA custodian to the nonprofit directly and 2) the money comes as an outright gift. The money cannot be put into a charitable gift annuity, a charitable remainder trust or a pooled income fund.

How do you know if an IRA gift is right for you?

If you have extra funds in your IRA that you would like to contribute to Merit School of Music but are worried about taxes, now is the time to take advantage of the new law. If a gift is given directly to Merit from the IRA, the funds would still be treated as part of the mandatory withdrawal amount but would not be taxable to you. This special provision is particularly attractive to all taxpayers with excess IRA funds and for those who do not itemize their income tax deductions. Merit suggests always checking with an advisor before any final financial decision is made to find out if this option is really the best for your estate. For those with extra IRA funds, this will lower the amount of mandatory IRA withdrawals they will have to take each year and pay tax on. Those who do not itemize were never able to take advantage of the charitable deduction, but formerly had to pay taxes on their IRA gifts to charity. Now you no longer have to.

For more information on the IRA rollover legislation, please contact Melissa Busch, Director of Major and Planned Gifts, at 312.267.4470. For any tax advice or financial instructions, please consult an advisor.

Return to main Planned Giving page.